University research students: who owns the IP?

The English Court has ruled on the ownership of inventions made by a PhD student at a UK university. Under the UK Patents Act 1977, employee’s inventions generally belong to their employers. Is a PhD student an employee or a consumer? If a consumer, is a term in an agreement to assign IP “unfair”, therefore potentially not binding on the student?

In Oxford University Innovation Ltd v Oxford Nanoimaging Ltd [2022] EWHC 3200 (Pat) (23 December 2022), the Court held that a PhD student is a consumer but the terms of the student’s contract were not unfair.

What’s the issue?

There is debate about who owns and who benefits from intellectual property (IP) rights arising from the research activity of academics and students. This debate has increased in importance as institutions have increased their focus on commercialisation of research work.

The court was asked to decide whether a PhD student was a consumer and therefore entitled to protection under consumer protection laws.

This case is the first in the UK to deal with whether consumer protection legislation is relevant to terms relating to the IP rights of students.

Facts

Oxford University’s technology transfer company claimed royalties allegedly due to it under a licence with the defendant licensee.

The licence related to IP rights in an imaging device developed at the university and commercialised by the licensee, a spin-out company. Most of the detailed development work had been undertaken by a student. The student had worked first as an employed research intern and then as a PhD student before leaving the university to become the licensee’s CEO.

Equity in the licensee was split between Oxford, the student and the PhD supervisor. The licence allocated royalties between the student, the supervisor and another employee of Oxford who subsequently left.

Licensee’s arguments

The licensee defended the claim for royalties (£700k plus) by arguing that the licence was void “for common mistake”, i.e. that the university's technology transfer company owned the licensed IP rights. According to the licensee the student retained the IP rights as the terms were “unfair” under consumer protection laws and therefore not binding.

High Court’s decision

The judge held that the licence was valid.

1. Rights to IP created during internship

The judge concluded that the patented imaging device was an invention that was reasonably to be expected from the student during his period of employed internship. The court highlighted that Mr Jing was employed to progress the development of a type of microscope that did not exist, and that he was employed due to his particular education in microscopes and emphasis on his design and build capabilities when he applied for the role. It therefore belonged to Oxford under the conventional application of section 39 of the Patents Act 1977. (See paragraphs 201 – 221 of the judgment).

No changes to the law here then. (Read our earlier article relating to a landmark UK Supreme Court judgment relating to an invention by employee Professor Shanks).

2. Rights to IP created during PhD studies

The further issue was whether the student's PhD contract, which transferred to the university title to inventions made by him during his studies, contravened the Unfair Terms in Consumer Contracts Regulations 1999. This depended on whether the student was a “consumer" within the meaning of reg.3 and, if so, whether the relevant terms were “unfair” within the meaning of reg.5.

A term which has not been individually negotiated is considered “unfair” if it “causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer” (reg.5). A term that is considered “unfair” is not binding on the consumer (reg.8).

The student’s position was that he was in a situation where he was unable to negotiate the terms of the contract. Moreover, the university’s policies were unfairly weighted in favour of the university and the senior academics, who may have contributed less than the junior researchers but would receive more reward.

The judge concluded that the PhD student was a “consumer” (see paragraphs 410 -426). However, the terms were not unfair because there was no significant imbalance to his detriment (see paragraphs 468 onwards) taking account of what each party (including the student) was getting from the contract.

Interesting issues

This case confirms that the terms relating to IP, which Oxford and potentially other universities agree with students, may include the transfer of those IP rights to the university.

Ownership of employee inventions is well-established. However, this is the first case to deal with whether consumer protection legislation is relevant to terms relating to IP rights of students.

The way forward

UK universities and other higher education institutions will be re-assured that this judgment upholds their current practices, in relation to ownership of IP resulting from research undertaken by research students.

However, UK institutions should consider reviewing their guidelines on how to divide revenues.

Many UK further education institutions leave this to the individuals concerned to decide how their total share is to be divided between the individuals.

This is an issue that junior researchers could raise in future claims and considering this now may save universities and other higher education institutions from headaches later on.

Law on ownership of employee inventions in other jurisdictions

Not all countries have express provisions in their laws relating to the ownership of inventions made during the course of employment. In those jurisdictions, the court tends to look to the written agreement between the parties to determine, based on the express or implied terms, whether an employer (such as a further education institution) is entitled to the invention.

For example, in Australia there is no such provision in the Commonwealth Patents Act 1990, with the principles deriving from, interestingly, a case between a university and its former employed professor: University of Western Australia v Gray [2009] FCAFC 116. There the court found that it did not need to imply IP ownership terms in favour of UWA into Gray’s employment contract for inventions made during the course of his employment since he did not have a duty to invent. There were also other factors, such as Gray’s freedom to publish his research, his ability to seek and receive external funding and collaborative agreements, where a finding of a duty to invent for UWA would have been inconsistent. The Gray case did not consider the consumer law issues that arose in the Oxford case.

Another example is in the United States where the ownership of a patentable invention initially vests with the individual inventor or inventors.

Key takeaways

• UK institutions, in particular, should review their guidelines on how shares are divided up where students are involved.
• Where employees may be viewed as working in multiple jurisdictions the situation becomes more complicated owing to the different approaches to ownership of inventions in those jurisdictions.
• Not only is it prudent to deal expressly with IP ownership in employment contracts, but it is also important to make clear the entity and jurisdiction to which the employee’s duties are attached.

We wait to see whether the licensee seeks to appeal this decision.

Postscript

On 26 January 2023, the judge refused permission to appeal on the basis that the grounds of appeal did not meet the required threshold of demonstrating a “real prospect of success” for the appeal. (See the judgment here.)

ONI may seek permission to appeal from the Court of Appeal.